It looks like someone linked you here to our printer friendly page.
Please make sure you go Back to Safehaven.com
for more great articles just like this one!

The Coming Debt Limit Drama: Government Wins, We Lose

By: Ron Paul | Monday, January 21, 2013

Last week President Obama bluntly warned Congress
that he will not negotiate when it comes to raising the statutory debt limit.
If Republicans attempt to use a debt ceiling vote to win concessions on spending
from the White House, Mr. Obama threatens simply to raise the limit by executive
order or other unilateral action.

This is business as usual in Washington. Democrats literally do not believe
we have a deficit and debt problem, and reliably propose greater borrowing
and spending. Republicans talk a good game when it comes to government debt,
but have no credibility to argue against deficits or abuses of executive power.
Brinksmanship ensues, and ugly compromises are reached at the 11th hour. We
all lose as the endless borrowing and money printing further erode our dollar
and our economy.

Keep in mind that the federal government relentlessly spends about $100 billion
more each month than it collects in taxes. This means roughly 40% of every
dollar Washington spends is borrowed, to be "paid back" only in highly devalued,
newly created money. Ultimately this can only lead to the destruction of the
US dollar, as history plainly teaches. But in the face of this reality Obama
just shrugs, turning to demagoguery and talk of little old ladies' Social
Security checks . Like Obama, far too many Americans view federal debt
as a nonissue. Consider Paul Krugman, America's most reliable Keynesian economist
and a beloved figure among mainstream journalists. He recently wrote
an article about the debt limit issue, in which he discussed a controversial
proposal to have the federal government simply create a platinum coin with
a face value of $1 trillion:

"Here's how it would work: The Treasury would mint a platinum coin with
a face value of $1 trillion (or many coins with smaller values; it doesn't
really matter). This coin would immediately be deposited at the Federal Reserve,
which would credit the sum to the government's account. And the government
could then write checks against that account, continuing normal operations
without issuing new debt."

To be fair, Mr. Krugman acknowledges that minting such a coin would be an
accounting "trick," but he is dead serious about this option for the Obama
administration. This then is the state of modern economics discourse in America,
where a respected New York Times economist literally can propose creating "money
for nothing" and have the idea taken seriously.

Krugman's suggestion is just another variant of the endless stimulus proposals,
which purport to create greater aggregate demand in the economy by creating
more money. Whether this is done by the Fed or the Treasury is of little importance,
as long as government is creating demand-side "growth," however artificial.

But in just a few short sentences Professor Hans-Hermann Hoppe eviscerates the
Krugmans of the world by pointing out the obvious: If governments or central
banks really can create wealth simply by creating money, why does poverty exist
anywhere on earth? Why haven't successive rounds of quantitative easing by
the US Fed solved our economic recession? And if Fed money creation really
works, and doesn't create inflation, why haven't Americans gotten richer as
the money supply has grown?

The truth is obvious to everyone. Fiat currency is not wealth, and the creation
of more fiat dollars does not mean that more rice, steel, soybeans, Ipads,
or Honda Accords suddenly come into existence. The creation of new fiat currency
simply strengthens a fantasy balance sheet, either by adding to cash reserves
or servicing debt. But this balance sheet wealth is an illusion, just as the
notion we can continue to raise the debt limit and borrow money forever is
an illusion.

Congressman Ron Paul of Texas enjoys a national reputation as the premier
advocate for liberty in politics today. Dr. Paul is the leading spokesman
in Washington for limited constitutional government, low taxes, free markets,
and a return to sound monetary policies based on commodity-backed currency.
He is known among both his colleagues in Congress and his constituents for
his consistent voting record in the House of Representatives: Dr. Paul never
votes for legislation unless the proposed measure is expressly authorized
by the Constitution. In the words of former Treasury Secretary William Simon,
Dr. Paul is the "one exception to the Gang of 535" on Capitol Hill.